NGL Energy Partners LP(NGL) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA totaled $87 million for the quarter, which included an $11 million loss in refined products. Removing the TPSL business would have resulted in pro forma adjusted EBITDA of $97 million for the quarter [23][32] - Total debt is expected to reduce from $2.6 billion to $2.3 billion with no reduction in LTM EBITDA, reducing leverage by about half a term [14][21] - The company declared a $0.39 per unit distribution for the quarter, targeting 1.3 times coverage on a trailing 12-month basis [35] Business Line Data and Key Metrics Changes - The Crude segment generated approximately $52 million of adjusted EBITDA, consistent with prior quarters, with Grand Mesa volumes averaging 133,000 barrels per day [24][25] - Water adjusted EBITDA was $41 million for the quarter, with approximately 849,000 barrels per day of disposal volumes [26] - Adjusted EBITDA for the Liquid segment totaled $12 million, benefiting from recently acquired terminals, particularly the Chesapeake export facility [30] Market Data and Key Metrics Changes - The company expects significant growth in the water business for the remainder of the year, particularly with the addition of Mesquite [29] - Fresh water sales were slightly lower than expected, but the company anticipates catching up through the remainder of the year [27] - The company hedged approximately 3,500 barrels per day for the remainder of fiscal 2020 at a weighted average price of just over $60 per barrel [28] Company Strategy and Development Direction - The company signed an agreement to sell refined products, with proceeds expected to approximate $300 million, which will be used to reduce debt and increase availability on the bank line of credit [10] - The company is focused on long-term contracts across all three businesses to increase cash flow predictability [12] - The company aims to maintain a compliance leverage target of 3.25 times and all-in leverage under five times [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market's reaction to the sale of refined products, noting minimal stock price impact [9] - The company anticipates a significant ramp in water volumes in the second half of the year, driven by producer activity [41] - Management highlighted the importance of maintaining a healthy balance sheet while exploring acquisition opportunities in the water sector [58] Other Important Information - The company expects to close the sale of the TPSL division by the end of September, with an updated FY 2020 guidance range for the refined products segment of $15 million to $30 million [34] - The company has retained its rack marketing and gas blending businesses, which are expected to be profitable despite some inventory risk [50][51] Q&A Session Summary Question: Can you break out CapEx spend in the first quarter? - About $250 million was spent, with almost $200 million in water, including $82 million on acquisitions [37] Question: Any change to expectation for organic growth CapEx? - No changes to the growth CapEx guidance [38] Question: What are the expectations for water volumes going forward? - A significant increase in volumes is expected starting at the end of September [39] Question: Can you expand on the Intrepid joint marketing deal? - Intrepid has more water rights in New Mexico and will market both companies' water [44] Question: What businesses are left in refining? - The retained businesses include rack marketing, gas blending, and renewables, which are expected to be profitable [49] Question: Any updated thoughts on share repurchase? - The company is considering share repurchase due to attractive pricing [59]